Lawmakers Sink Teeth Into the SEC

Network News

Lawmakers gave officials from the Securities and Exchange Commission a severe tongue-lashing yesterday over investment fund manager Bernard L. Madoff, accused of running nothing more than a $50 billion Ponzi scheme.

Members of a House Financial Services subcommittee were angry at the SEC officials for two reasons: failing to catch Madoff before he defrauded investors despite detailed and ample warnings from whistleblower Harry Markopolos, yesterday's star witness, and failing to answer specific questions about Madoff, citing a form of executive privilege.

Time and again, SEC enforcement chief Linda Chatman Thomsen and acting general counsel Andrew N. Vollmer said they were unable to answer the panel's questions because the agency itself is being investigated by its inspector general for the way it handled Markopolos's tips, which came to the SEC nearly a decade ago.

Rep. Gary L. Ackerman (D-N.Y.) delivered the most sustained and withering attacks on the witnesses.

"The economy is in crisis," Ackerman said. "We thought the enemy was Mr. Madoff. I think it's you," Ackerman said to Vollmer.

"Your value to us is useless," Ackerman continued. "Your value to the American people is worthless, your contribution to this proceeding is zero."

Ackerman then employed a colorful metaphor to describe how the SEC responded, or did not, to Markopolos's investigation.

"One guy with a few friends and helpers discovered this thing nearly a decade ago," Ackerman said. "He led you to this pile of dung that this Bernie Madoff was and stuck your nose in it and you couldn't figure it out. You couldn't find your backside with two hands with the lights on."

Ackerman was just getting warmed up.

"If anyone could make the case better than Mr. Markopolos, and I didn't think they could, about you people being completely inept, you have made the case better than him," Ackerman said.

"I am profoundly sorry you feel that way," Thomsen replied, meekly.

Ackerman, though, reserved his harshest treatment for Vollmer, trying to get him to admit, simply, that the SEC officials are relying on executive privilege to avoid answering some questions -- a position Vollmer said the SEC commissioners approved, though without consulting the Justice Department.